ERP - the crucial ingredient in alphabet soup
Three years ago, if you opened any publication, whether business or IT-focused, you'd be bombarded with a host of headlines singing the praises of enterprise resource planning or as it's become known, ERP. Today you open the same publications and it's a barrage of e-commerce hype that hits you between the eyes. If ERP is mentioned at all, it's quoted in the obituaries.
But is ERP really dead or is it finally coming into its own? To see the future, we need to look to the past. In the early 70's most corporations had point solutions to manage the different areas of the business, like inventory and financial control systems. This was followed by MRP1 and MRP11 systems that enabled the integration of inventory systems with planning. ERP was an extension of this in that it provided integration across the entire organisation to optimise all the resources within a business, including previously isolated areas of transportation and distribution.
As companies recognised the potential offered by ERP, they took the plunge. The results have been mixed. The complexity of ERP systems has seen some businesses wrestle with the challenge of integrating business processes to take advantage of this technology. However, there are many more organisations that have reaped the rewards of a successful ERP implementation.
But just as they begin to get comfortable with their ERP systems, the next big thing has emerged - the Internet. Business decision-makers and IT managers once again have a host of consultants and vendors seducing them with tales of riches, this time in the form of various e-opportunities. Headlines screaming 'E-business or no business', coupled with cries of the death of ERP, no doubt depresses them.
Luckily, Darwin's theory of evolution holds true in the modern world of IT. Just as the MRP1 and MRP 11 systems formed the basis of ERP, so does ERP form the groundwork of any e-enabled initiative. The advent of the Internet simply provides the possibility of extending integration from within the business to beyond.
As organisations begin to take advantage of the Internet and enter the world of the extended enterprise and e-business, it is becoming increasingly apparent that ERP is the foundation, which makes all this possible. Without an ERP system, businesses will be unable to satisfy the demand originating through their Web sites. They will be unable to play a role in an effective value chain. They will be unable to connect their sexy front-end to anything meaningful at the back-end. Ultimately, they will be unable to effectively participate in the e-economy.
Supply chain management (SCM) and business-to-business e-commerce are two areas where ERP comes into its own. The Internet, linked to an ERP backbone, optimises the resources within a supply chain by linking suppliers and customers. This value chain minimises inventory holding across the chain, as the organisations involved no longer need to keeping excess stock in case of fluctuation in demand or unreliable suppliers.
It is through an effective supply chain or efficient business-to-business e-commerce initiative that organisations are able to put the first step in place towards better customer relationship management (CRM). Similarly, a sales force automation solution designed to improved CRM, will be worthless without an ERP system to connect to. A company that fronts an online shopping site without a connection to a reliable back-end delivery system could potentially find itself in financial ruin, rather than in the anticipated pound seats.
So if an organisation is considering CRM, SCM, or e-commerce, the crucial building block to link these technologies and processes together is ERP. E-commerce is great in principle. E-fulfilment is what makes it real. ERP is what enables this. Far from being dead, ERP is instead finally proving its worth.